HP Reports Stellar Fourth-Quarter, Fiscal-Year Results

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On November 29th, HP Inc. announced results for its 2018 fiscal year, and fourth-quarter 2018. For the full year, HP reported net revenue of $58.5 billion, up 12 percent, and net earnings of $5.3 billion, up 111 percent, with both versus fiscal-year 2017.

Fiscal 2018 net earnings per share (EPS) was $3.26, versus $1.48 for fiscal-year 2017, and above the previously provided outlook of $2.82 to $2.85.

Fourth-Quarter 2018

Fourth-quarter net revenue was $15.4 billion, up 10 percent versus fourth-quarter 2017.

Fourth-quarter EPS was $0.91, up from $0.39 for fourth-quarter 2017 and above HP’s  previously provided outlook of $0.48 to $0.51.

HP Inc. President and CEO Dion Weisler commented: “Our results once again demonstrate HP’s consistent performance with full-year non-GAAP EPS growth of 22 percent year-over-year and free cash flow generation of $4.2 billion. These results reflect our continued innovation across the portfolio and sharp execution across segments and regions as we position HP for continued long-term sustainable growth.”

Fourth-Quarter Segment results

HP Inc.’s Personal Systems net revenue was up 11 percent year-over-year with a 3.8 percent operating margin. Both Commercial and Consumer net revenue increased 11 percent. Total units were up 6 percent, with Notebooks units up 8 percent, and Desktops units up 2 percent. Operating profit was $378 million.

HP Inc.’s  Printing group’s net revenue was up 9 percent year-over-year, with a 16.1 percent operating margin. Total hardware units were up 11 percent with Commercial hardware units up 85 percent and Consumer hardware units up 3 percent. Supplies net revenue was up 7 percent. Operating profit was $851 million.

The fourth quarter marks several consecutive quarters of revenue growth for both HP’s Personal Systems and PC groups.

Impact of Tariffs

In a November 29th conference call, HP said it hasn’t considered any potential impact from unannounced tariffs.

HP said tariffs announced by the United States on products imported from China and implemented through September didn’t have an impact on the company during the fourth quarter, but did have an impact on its Personal Systems group and on its desktop PCs.

“We are working through a variety of mitigation items on the tariffs, pricing included to be one of the ways we mitigate,” said HP Chief Financial Officer Steve Fieler.

Asset management

HP generated $4.5 billion in net cash provided by operating activities and $4.2 billion of free cash flow in fiscal 2018. Free cash flow includes net cash provided by operating activities and net investments in property, plant, and equipment of $0.4 billion.

HP used approximately $2.6 billion of cash during fiscal 2018 to repurchase approximately 112 million shares of common stock in the open market. When combined with the almost $0.9 billion of cash used to pay dividends, HP returned 83 percent of its free cash flow to shareholders in fiscal 2018.

Outlook

For the fiscal 2019 first quarter, HP estimates net EPS to be in the range of $0.46 to $0.49.

For the fiscal 2019 year, HP estimates net EPS to be in the range of $2.04 to $2.14.

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